Summer Budget 2010 Introduction Income Tax Tax Credits and Benefits National Insurance Contributions Employees Savings Capital Gains Tax Inheritance Tax Corporation Tax Business Tax Value Added Tax Insurance Premium Tax Other Measures Tax Tables National Insurance

Capital Gains Tax Rate of Tax The Liberal Democrats had pressed for a significant increase in the rate of CGT, and some expected it to rise to the same level as the higher rates of income tax (40% or 50%). There was also speculation about the possible reintroduction of reliefs for inflation or for length of ownership (tapering). It is encouraging that Mr Osborne rejected these on grounds of complexity: the computation of CGT was significantly simplified by the abolition of taper relief in 2008, and its reintroduction would have required yet another redesign of stockbrokers' software. Instead, the Chancellor implemented an immediate rise in the CGT rate to 28%, to apply to disposals after midnight on Budget day, but only affecting those who pay higher rate income tax. It is unprecedented to change the CGT rate during a tax year, and the details of how this works for people who have made disposals both before and after 23 June 2010 are complicated. Deductions, reliefs and the annual exemption can be allocated by the taxpayer in the most beneficial way, so that the maximum amount of gain is charged at the old 18% rate and the minimum at the new higher rate. Basic rate taxpayers will continue to pay CGT at 18%. Where a gain is large enough to take someone over the higher rate income tax threshold, the 28% rate will apply to the excess. The annual exemption for 2010/11 remains unchanged at £10,100, and Mr Osborne announced that it will increase in line with inflation in future years as it has done in the past. However, he has said that the rate of CGT will be reviewed in the next Budget, so there is a possibility that the rate could rise again for the next tax year. Tax Trap Will your gains be charged at the new higher rate? Trustees Where assets are disposed of after 22 June 2010, trustees and personal representatives of deceased persons will pay CGT on all gains above their annual exemption at 28%. Entrepreneurs' Relief (ER) ER allows an effective rate of CGT of 10%, instead of 18% or 28%, on qualifying disposals which give rise to gains up to a lifetime maximum. Mr Darling increased the limit from £1m to £2m with effect from 6 April 2010; Mr Osborne has increased it further to £5m with effect from 23 June 2010. Earlier disposals on which ER has been given will be deducted from the lifetime allowance for future sales. ER has up to now achieved an effective rate of 10% by deducting 4/9 from the chargeable gain (5/9 x 18% = 10%). As there will now be two possible rates of CGT, this would no longer work, so gains qualifying for ER will simply be charged at 10%. Qualifying disposals include the disposal of a business or an interest in a trading business, or of shares in a trading company by someone who works for the company and owns 5% of it, or the disposal of a business asset when the business ceases.